State Farm Re-evaluating Agency Compensation

Insurer Is Among DDB's Most Lucrative Clients

By Published on .

CHICAGO ( -- State Farm is reassessing how it compensates its advertising and marketing-services agencies, following in the steps of Coca-Cola, Anheuser-Busch and other major marketers.

State Farm's corporate headquarters in Bloomington, Illinois.
State Farm's corporate headquarters in Bloomington, Illinois.
A State Farm spokeswoman declined to comment, citing a policy of not publicly discussing vendors' financial terms, but two people familiar with the matter said the insurance giant has begun reviewing its agency payment practices. State Farm spent $576 million on U.S. advertising last year.

It wasn't immediately clear whether the insurer is looking to slash fees; adopt the sort of value-based model lately championed by Coke; or simply to bring its practices -- said to have not been updated in years -- closer in line with contemporary norms.

Whatever the case, any change in compensation practices is likely to affect its longtime creative agency, DDB, Chicago. The account is one of the agency's three highest-profile pieces of business (alongside McDonald's and Anheuser-Busch), and has historically been among its most lucrative. A DDB spokeswoman declined to comment.

DDB would not be the only shop affected, as State Farm's roster also includes OMD, DraftFCB, Alma DDB, Marketing Arm and Weber Shandwick. Beekman Associates is leading the compensation review.

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